Euro jump, yen rise puts brakes on dollar By Reuters

By Tom Westbrook

SINGAPORE (Reuters) – The euro held on to its biggest rise in four months on Thursday following hawkish comments from central bank policymakers, while the yen extended its strongest week in three months on bets that Japan is expected to raise interest rates in December.

The move halted the greenback’s recovery ahead of what could be limited trading for the rest of the week due to the US Thanksgiving holiday.

A member of the board of the European Central Bank, Isabel Schnabel, told Bloomberg overnight that the reduction in prices should be gradual and move to the political, not accommodation, sector, and investors will return to expensive bets, sending the euro up 0.7% to $ 1.0560.

It faces a resistance of about $ 1.06, which can be measured as a calculation of inflation in Germany, due to the end of the session, turning stronger than expected.

The yen, meanwhile, has been on a two-day high, rising above its 200-day high of 151.50 per dollar. It was slightly weaker in morning trade in Asia, rising to around 160 per euro.

Prices mean there is a 60% chance of a 25 basis point rate hike in Japan next month, up from about 50% a week ago, with most analysts polled by Reuters expecting a hike.

“Stronger-than-expected readings in Japan and fears that the Fed may cut rates again in December have added to pressure on the dollar/yen,” said Jane Foley, chief economist at Rabobank in a note to clients.

The move, combined with what traders said was a decline in corporate capital spending after meeting end-of-the-month needs, sent the dollar down sharply and down nearly 0.8% overnight to 106.13.

U.S. yields fell overnight, adding to the dollar’s decline, after data showed U.S. consumer spending met expectations with a 0.2% monthly increase.

Sterling rose on a weaker greenback to $1.2675 and the New Zealand dollar gained more than 1% on Wednesday after a 50-basis point cut in Wellington was less than market expectations of 75 basis points.

Last settled at $0.5892, while the Aussie/kiwi cross fell 0.7% overnight to A$1.1020. The move, along with a weaker-than-expected rate hike, saw the Australian dollar’s economic gains rise 0.4% overnight.

A statement at 0855 GMT from Reserve Bank of Australia governor Michele Bullock is expected to provide guidance on the central bank’s sensitivity to inflation.

“We think that if policy is discussed, the same ‘warning’ message could be repeated by the RBA in a different way than many others,” said Corpay Strategist Peter Dragicevich.

In emerging markets, Brazil’s real yield fell to a 10-year yield of 38.5 percent on worries about tax cuts in the long-term budget.